Derivative Financial Instruments

3 Months Ended

Oct. 01, 2011

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

4. DERIVATIVE FINANCIAL INSTRUMENTS

     Sysco manages its debt portfolio to achieve an overall desired position of fixed and floating rates and may employ interest rate swaps from time to time to achieve this position. The company does not use derivative financial instruments for trading or speculative purposes.

     In fiscal 2010, the company entered into two interest rate swap agreements that effectively converted $250.0 million of fixed rate debt maturing in fiscal 2013 and $200.0 million of fixed rate debt maturing in fiscal 2014 to floating rate debt. These transactions were entered into with the goal of reducing overall borrowing cost and increasing floating interest rate exposure. These transactions were designated as fair value hedges since the swaps hedge against the changes in fair value of fixed rate debt resulting from changes in interest rates.

     The location and the fair value of derivative instruments in the consolidated balance sheet as of October 1, 2011, July 2, 2011 and October 2, 2010 are as follows:

	Asset Derivatives			Liability Derivatives
	Balance Sheet			Balance Sheet
	Location	Fair Value		Location		Fair Value
	(In thousands)
Fair Value Hedge Relationships:
Interest rate swap agreements
October 1, 2011	Other assets	$	13,246		N/A		N/A
July 2, 2011	Other assets		13,482		N/A		N/A
October 2, 2010	Other assets		17,484		N/A		N/A

     The location and effect of derivative instruments and related hedged items on the consolidated results of operations for the 13-week periods ended October 1, 2011 and October 2, 2010 presented on a pre-tax basis are as follows:

		Amount of (Gain) or Loss
	Location of (Gain)	Recognized in Income
	or Loss Recognized	13-Week Period Ended
	in Income	October 1, 2011			October 2, 2010
Fair Value Hedge Relationships:		(In thousands)
Interest rate swap agreements	Interest expense	$	(487	)	$	(500	)

     Hedge ineffectiveness represents the difference between the changes in the fair value of the derivative instruments and the changes in fair value of the fixed rate debt attributable to changes in the benchmark interest rate. Hedge ineffectiveness is recorded directly in earnings within interest expense and was immaterial for the 13-week periods ended October 1, 2011 and October 2, 2010. The interest rate swaps do not contain credit-risk-related contingent features.